Business conditions in Kenya continued to improve in January 2026, although at a slower pace, as growth in output, new orders and employment moderated amid easing demand and declining backlogs, according to the latest Stanbic Bank Kenya Purchasing Managers’ Index.
The headline PMI fell to 51.9 in January from 53.7 in December, marking the fifth consecutive month above the 50.0 threshold that separates expansion from contraction. While the reading signalled ongoing improvement in private sector activity, it also represented the joint slowest pace of growth in the current expansionary sequence.
Data from the survey, compiled by S&P Global, showed that business activity expanded at a solid rate, remaining above the long run average despite slipping to its lowest level in four months. Firms attributed the rise in output largely to demand driven factors, including increased customer referrals, higher order volumes and new contracts supported by marketing efforts and competitive pricing strategies.
New business also continued to grow at the start of the year, although the rate of expansion softened to the weakest level in four months. Performance varied across sectors, with manufacturing firms most likely to report an increase in sales. In contrast, companies operating in construction as well as wholesale and retail trade recorded an outright decline in demand.
As growth in activity slowed, firms adjusted their hiring and purchasing decisions. Employment levels rose in January, but at a weaker pace compared to recent months. Purchasing activity also increased more moderately, reflecting a reduction in outstanding work and improved operational efficiency.
The decline in backlogs was particularly notable, with the rate of reduction accelerating to the fastest level recorded since April 2021. Survey respondents indicated that improved workflow management and better alignment between output and demand had reduced pressure on capacity.
Supply chain performance continued to strengthen, extending a run of improvements to twelve consecutive months. Supplier delivery times shortened again in January, often linked to heightened competition among vendors. At the same time, firms sought to limit excess inputs, resulting in only a marginal increase in inventories, the slowest pace of stock accumulation in six months.
Despite easing demand growth, operating expenses rose at a solid pace. Businesses reported higher prices for raw materials, alongside increased tax charges, import fees and technology related costs. Output prices also rose, although the average increase remained marginal as firms restrained price hikes due to competitive pressures and concerns about slowing growth.
Commenting on the findings, Christopher Legilisho, Economist at Standard Bank, said, “The Stanbic Kenya PMI releases for January 2026 continue to show a robust private sector. Despite slightly lower output, new order and employment growth, January metrics were positive, confirming a sustained expansion of activity in the private sector.”
He added that marketing efforts and customer referrals continued to support activity, while improved access to credit enabled firms to increase output. “There is also growing optimism about output expectations over the next twelve months,” Legilisho noted.
According to the survey, improved demand conditions supported sustained increases in quantities purchased and inventories, while supplier delivery times continued to shorten. However, firms remained cautious on pricing, with increased competition limiting the ability to pass higher costs on to customers. This trend aligned with official data showing headline inflation easing to 4.4 percent in January.
Looking ahead, business confidence strengthened slightly, with output expectations rising to a five month high. Firms cited expansion plans, increased marketing, diversification, new premises and contract bids as key drivers of optimism for the year ahead.
The Stanbic Bank Kenya PMI is based on responses from around 400 private sector companies across agriculture, mining, manufacturing, construction, wholesale, retail and services. Data for the January survey were collected between 12 and 28 January 2026.
